AVB/EQR Merger: A Target on Their Backs

REITland is abuzz following a Bloomberg story that apartment behemoths AvalonBay and Equity Residential are talking merger. Such a tie-up would create an $80 billion apartment colossus. From an economic point of view, given the large geographic overlaps and the potential for large G&A savings, the merger would make a great deal of sense. In addition with the RealPage settlement both AVB and EQR lost the ability to engage in collusive practices. So instead of using RealPage, the new REIT would no longer have to collude; it would be one entity. 

However, from a political point of view, it would place a target on the back of the new entity. With high rents becoming a political flashpoint, populist politicians would place everything it does under a microscope and it would be continually harassed. Thus, if I were in the boardroom, I would think long and hard about the potential merger.